Coca-Cola braces for more lockdowns with proven strategies

Global beverage giant Coca-Cola has told investors that it is prepared for surges in the Delta variant with a strategy built around its core brands. 

With the Delta variant in the ascendant across the world, raising the possibility of further lockdown restrictions, Coca-Cola’s top brass outlined their plans in a call to investors, Reuters reports.

Why it matters

Innovation can spur growth in the good times, but when the macro-environment grows rocky, it is core brands and a solid supply chain that will power the business. 

Takeaways

• Kill your darlings. Extraneous brands can be dead weight, as the pandemic year proved. The company either shuttered brands like TaB diet soda, or sold off others, like ZICO coconut water.
• Brands are a moat for margins. CEO James Quincey told investors that forecast cost increases are expected towards the end of the year, but that pricing power is expected to hold up margins. 
• Distribution matters. Coca-Cola’s larger share of out-of-home consumption, whether in cinemas, restaurants or sport venues, means a greater share of the economic recovery dollar (powering 41% revenue growth in Q2), but also a weakness should lockdowns return. But value share gains in at-home consumption through the pandemic year are expected to protect the firm’s position. 

Key quote

“When things are more constrained, the bigger brands are the ones you focus on” – John Murphy, CFO, Coca-Cola.

Sourced from Reuters, Seeking Alpha